One definition of commodity markets is:"commodity markets are markets where raw or primary products (often called as commodities) are traded" [1]
These commodities can be divided into three categories:
Energy, such as crude oil, coal and electricity.
Metals, such as copper, aluminum, nickel, gold and silver.
Agricultural, such as grains, pulses, oil seeds or coffee.[2]
Impact on food price
The food price has more than doubled between 2002 and 2012. Reasons for high prices are based on the basic principles of supply and demand. At the moment the demand is constantly growing especially in the developing countries. Also the production of bio-fuels has an affect. The production growth is weak due to slowdown in yield growth, the fuel prices are high and there are constraints to to land and water and the stocks are low. The volatility increases due to variations in production, growing trade, stronger linkages to energy and financial markets, policy impacts and macroeconomic factors such as interest rates.[3]
Figure 1. Food prices. (UNCTAD 2013)
Speculations on commodity markets can also lead to price volatility.
There are four kind of speculations. These are merchant hording, brokers' speculation on spot markets, conventional speculations on futures markets and financial engineering. In the case of merchant hording it can be that the merchants are holding a commodity back from the market in order to get the prices to rise and then sell them for a higher price. Brokers speculation on spot market means that the brokers can squeeze the supply in the market in the same way as the merchant. It can also try to corner the market that means to gain a monopoly situation by buying all the supplies. In the conventional speculations on futures markets the brokers try to take advantage of small price differences between similar markets.[4] Financial engineering means: "the application of technical methods, especially from mathematical finance and computational finance, in the practice of finance".[5]
Links to other SDGs
In SDG 2, end hunger, achieve food security and improved nutrition and provide sustainable agriculture, there is pne goal that is directly related to food commodity markets. The goal 2.c."adopt measures to ensure the proper functioning of food commodity markets and their derivatives, and facilitate timely access to market information, including on food reserves, in order to help limit extreme food price volatility".[6] While the food commodity markets has an strong influence on food prices, the other SDG affected are no poverty, zero huger, good heath and well being and life on land.
Impact on food security
There is a clear relationship between trade and food security. One definition of food security is by the World Summit on Food Security in 1996 is that “food security exists when all people, at all times, have physical and economic access to sufficient, safe and nutritious food that meets their dietary needs and food preferences for an active and healthy life”. The four main pillars in food security are access, availability, utilization and stability.
In the table below is a illustration of hoe trade affect food security.
Table 1. Main components and limitations of the trade narratives for food security
^Adapted from J. Clapp. (2015) .Food security and international trade: unpacking disputed narratives. Background paper prepared for The State of Agricultural Commodity Markets 2015–16. Rome, FAO.
Definition
One definition of commodity markets is:"commodity markets are markets where raw or primary products (often called as commodities) are traded" [1]
These commodities can be divided into three categories:
Impact on food price
The food price has more than doubled between 2002 and 2012. Reasons for high prices are based on the basic principles of supply and demand. At the moment the demand is constantly growing especially in the developing countries. Also the production of bio-fuels has an affect. The production growth is weak due to slowdown in yield growth, the fuel prices are high and there are constraints to to land and water and the stocks are low. The volatility increases due to variations in production, growing trade, stronger linkages to energy and financial markets, policy impacts and macroeconomic factors such as interest rates.[3]
Speculations on commodity markets can also lead to price volatility.
There are four kind of speculations. These are merchant hording, brokers' speculation on spot markets, conventional speculations on futures markets and financial engineering. In the case of merchant hording it can be that the merchants are holding a commodity back from the market in order to get the prices to rise and then sell them for a higher price. Brokers speculation on spot market means that the brokers can squeeze the supply in the market in the same way as the merchant. It can also try to corner the market that means to gain a monopoly situation by buying all the supplies. In the conventional speculations on futures markets the brokers try to take advantage of small price differences between similar markets.[4] Financial engineering means: "the application of technical methods, especially from mathematical finance and computational finance, in the practice of finance".[5]
Links to other SDGs
In SDG 2, end hunger, achieve food security and improved nutrition and provide sustainable agriculture, there is pne goal that is directly related to food commodity markets. The goal 2.c."adopt measures to ensure the proper functioning of food commodity markets and their derivatives, and facilitate timely access to market information, including on food reserves, in order to help limit extreme food price volatility".[6] While the food commodity markets has an strong influence on food prices, the other SDG affected are no poverty, zero huger, good heath and well being and life on land.
Impact on food security
There is a clear relationship between trade and food security. One definition of food security is by the World Summit on Food Security in 1996 is that “food security exists when all people, at all times, have physical and economic access to sufficient, safe and nutritious food that meets their dietary needs and food preferences for an active and healthy life”. The four main pillars in food security are access, availability, utilization and stability.
In the table below is a illustration of hoe trade affect food security.
[7]
Quiz created by Markus Kemppainen with GoConqr
Available at: http://unctad.org/meetings/en/Presentation/SUC_MYEM2013_20032013_Boubaker%20BEN-%20BELHASSEN.pdf (Accessed 22.2.2017)
Available at: https://sustainabledevelopment.un.org/?page=view&nr=164&type=230&menu=2059. (Accessed 22.2.2017).